Microsoft Breathes Life Into America’s Dullest Tech Company

Microsoft’s involvement in the deal to take Dell private further illuminates Dell’s emerging approach to the large business market, which first began taking shape with its acquisition of Quest Software in 2012. According to Gartner Inc. analyst Leslie Fiering, Dell’s new strategy will be to provide business customers with hardware for server farms, cloud hosting services it can sell either directly to businesses – or to third parties known as value-added resellers who rent cloud solutions to businesses – and other “turnkey solutions.”

From Microsoft’s perspective, a closer relationship with Dell should help it ensure the Windows operating system remains at the core of Dell desktops and laptops, as well as serve as the backbone of Dell’s emerging cloud stack. “Dell’s product line of services and software could become a tremendous showcase for Microsoft,” she told CIO Journal Tuesday morning.

Ms. Fiering said Quest Software includes applications that will help Dell improve its cloud offering. “The Wyse acquisition not only brought Dell thin client software but [intellectual property] that we’re seeing as some very interesting business software offerings, and could indicate the direction Dell wants to go into.”

Dell and Microsoft will run into old nemesis International Business Machines Corp., which already has deep experience running server farms on behalf of customers, and is starting to expand into business mobile services as well.

Dell, which was once the world’s largest PC maker, with a market cap that peaked years ago at $100 billion, was successful because it had an innovative business model and manufacturing process. By assembling its PCs on a made-to-order basis, and selling exclusively over the Web, the company became a pioneer of e-commerce, inventory management, logistics, speedy delivery, and the maximization of working capital. That was why founder Michael Dell was known as a great innovator.

Neither he nor his company was ever known as a great technological innovator. Dell is a great American success story. But in terms of innovation, in the era of Apple Inc,Samsung Electronics Co Google Inc and Facebook Inc., it is dull by comparison. Microsoft, of all companies, might just have a shot at waking it up.

Dell’s focus on manufacturing and business model was enough, at least for the first 15 years or so after Dell founded the company in his college dorm room in 1984, The PC market was new and in growth mode, and there was a lot of value in being the company that delivered products to that market in the fastest, most reliable and cost-effective way.

But Steve Jobs and Apple rendered that model obsolete. Suddenly, everything else looked like a commodity — even relatively powerful and cost-efficient machines from Dell. Apple triggered a wave of consumerization that turned the tech market into a fashion industry. And over time, products such as the smart phone and the tablet began to displace the PC itself. Dell was simply too narrow a company to keep up. It tried to focus on the business market, but even that strategy was insufficient because it failed to take into account the impact of consumer choices on the business market. There was simply no getting around the need to compete effectively in the consumer-driven era of the smartphone and tablet.

Microsoft has been playing catch-up in the consumer marke for years. But it has been working in a dogged and persistent manner, and while its execution has been far from perfect, it hasn’t been out of touch the way Dell has. Microsoft’s new line of Windows Phone 8 smartphones and Surface tablets might not be immediate hits, but Microsoft is playing a longer term game. And it can accelerate Dell’s efforts to build out business services, especially those delivered over the cloud.

Fiering said she wouldn’t bet against Michael Dell, whom she called “a formidable strategist and operations person… Here he goes again doing something totally unexpected and very bold. I’m willing to give him the benefit of the doubt until he proves me wrong,” she said.

Comments (4 of 4)

Dell's CEO and management team had their heads buried in the sand while the PC continually became a less sought after computing device. Read the CEO's own words. Guess he didn't think tablets would catch on. Sounded more like he wasn't watching the market. Today is the worse day, late in the game, to be deciding to "change" to morph to the competitor's well-established modern device flood. And ... MS thinks their help will "help?" Hmm ... time will tell. But, I wouldn't slid my stock money on "too little too late" moves like this.

5:03 pm February 6, 2013

ThinkAboutIt wrote:

Dell's CEO and management team had their heads buried in the sand while the PC continually became a less sought after computing device. Read the CEO's own words. Guess he didn't think tablets would catch on. Sounded more like he wasn't watching the market. Today is the worse day, late in the game, to be deciding to "change" to morph to the competitor's well-established modern device flood. And ... MS thinks their help will "help?" Hmm ... time will tell. But, I wouldn't slid my stock money on "too little too late" moves like this.

11:13 pm February 5, 2013

Bill wrote:

Microsoft needs to stop drinking. It has already taken Nokia home with it and now Dell?

10:50 am February 5, 2013

Paulli wrote:

The title should read - the 'I should have thought of that' software company invest heavily in the dullest tech compnay.

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